Will the end of David Atkins’ reign as chief executive of Hammerson spell a change in fortune for shareholders in the shopping centre owner (Louisa Clarence-Smith writes)? They probably hope so. He has led the company for more than a decade and over that time shareholder returns have fallen conspicuously. Investors who bought shares when Mr Atkins, 54, was appointed in October 2009 and who held on to their investment will have seen a return of -71 per cent, according to Jefferies, the broker.
Mr Atkins transformed the company into a retail-focused real estate investment trust, selling its London office portfolio in 2013. That strategy worked initially, with the shares rising to a peak of 700p in 2015 — but it has been unravelling over the past five years, reeling from the twin storms of rising costs and online competition battering the high street. The shares have been as low as 48p, though were up 10¾p, or 9.6 per cent, at 122½p yesterday.
The FTSE 250 company has stakes in retail parks and shopping centres including Bicester Village in Oxfordshire, the Bullring in Birmingham and Cabot Circus in Bristol. It is almost completely invested in retail, but has started to increase its exposure to other property sectors, with 9 per cent of its portfolio reallocated to mixed use, including residential.
This week Hammerson’s board demonstrated its commitment to a strategy overhaul. It announced that David Tyler, 67, who has served as chairman for the past seven years, also would stand down, making way for a fresh leadership team as Rob Noel, 56, former chief executive of Land Securities, joins as chairman.
Change is afoot, but any turnaround plan is unlikely to be announced for some months. Mr Noel does not yet have a confirmed start date. The company has said only that he will join “no later” than October. Then he will have to appoint a chief executive, finding an external candidate if he wants the market to believe that this really is the dawn of a new era. An inevitable strategy review is likely to take three to six months, maybe more, at which point we can expect the new team to sell their vision to the markets. Analysts say that Hammerson will need to raise as much as £1 billion to fix its balance sheet.
Expect to see the company treading water for much of the rest of the year, then, as it navigates the fallout from the pandemic. The retail investment market is all-but-frozen, given the uncertainty around valuations, and rental income has been hammered. Hammerson received only 37 per cent of the rent it was due for the present quarter at the end of March. Some of the missing rent will be reclaimed, but some will be lost as retailers and hospitality businesses struggle to survive and demand hefty rent cuts.
Hammerson scrapped its final dividend in March and has suspended its dividend guidance for 2020. It had cash and undrawn facilities of £1.2 billion at the end of last year, had £2.4 billion of net debts and 3.3 times the capital needed to cover payments.
It is not as vulnerable as Intu Properties, its teetering rival, but remains stuck in a position where it doesn’t have the capital to invest and it is unable to sell assets because there isn’t the demand among would-be buyers.
In March, Tempus advised investors to “avoid” Hammerson shares, given a prolonged pandemic that would decimate revenues at already indebted companies. There is some optimism about Hammerson’s commitment to turn around its fortunes, but the outlook for shareholder returns remains uncertain.
ADVICE Avoid
WHY Scale of damage caused by Covid-19 is unknown and there is no visibility on a turnaround strategy
Telecom Plus
There may have been few surprises in annual results yesterday from the owner of Utility Warehouse, thanks to a trading update in April, but there was still plenty there to please investors (Alex Ralph writes). Telecom Plus, the FTSE 250 company behind the utilities business, announced record revenue, profits and dividends for the year to the end of March and reiterated its guidance of profit for its present financial year to be only “marginally below” that of last year and for the dividend to be held flat.
Pre-tax profit was up 11.9 per cent to £48.1 million on revenue up 8.9 per cent to £875.8 million. The full-year dividend was raised 9.6 per cent to 57p a share. And those shares rose 90p, or 6.7 per cent, to £14.40 yesterday.
Telecom Plus sells energy, broadband, mobile and insurance to households and small businesses in Britain. The company was founded in 1998 by Charles Wigoder, who retains a 15 per cent stake and the unorthodox role of executive chairman.
Despite having joined London’s main market in 2000, it remains a relatively low-profile company. This is thanks in part to Telecoms Plus opting not to advertise and instead to use its incentivised, part-time self-employed “partners” to recruit customers via “word of mouth”. Customer numbers increased by 2.7 per cent to 652,237 in the year to March, a slowdown on the 4 per cent growth recorded in 2019, which reflected the impact of the government’s lockdown towards the end of the period.
The disruption has led to a “small reduction” in its net customer base during April and May, but Telecom Plus expects a “modest recovery” in customer numbers “over the coming months whilst the country remains in partial lockdown, with a gentle acceleration thereafter”.
There are also signs that Covid-19 is hastening the exit of cheaper, unsustainable rivals, while Telecom Plus also seems set to benefit from expectations that Ofgem’s price cap will fall from October, narrowing the gap between Telecom Plus’s standard energy prices and the cheapest deals at the bottom of the market.
ADVICE Buy
WHY Downturn is increasing partners and could shake out cheaper rivals
